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Post by newlender on Jan 1, 2016 12:56:08 GMT
Does anyone know if there is a % of a portfolio that is generally recommended for P2P investment by those in the know? Mine is now at 15% (mostly in RS) and I am leaving it there for the moment. I realise that everyone is different, but let's say as a general rule for someone with no debts and a reasonable spread of investments elsewhere, plus the usual few months' outgoings in cash.
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agent69
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Post by agent69 on Jan 1, 2016 13:01:03 GMT
Does anyone know if there is a % of a portfolio that is generally recommended for P2P investment by those in the know? Mine is now at 15% (mostly in RS) and I am leaving it there for the moment. I realise that everyone is different, but let's say as a general rule for someone with no debts and a reasonable spread of investments elsewhere, plus the usual few months' outgoings in cash. I guess a lot depends on your attitude to risk. My P2P portfolio represents about 10% of my liquidatable assets, and I am comfortable with that
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pom
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Post by pom on Jan 1, 2016 15:04:15 GMT
I recommend you read some of the threads in the General P2x Discussion board - lots there about the amounts fellow forumites have invested in P2P and their platform diversity. From my perspective your p2p pot size looks sensible but you may want to rethink how many eggs you have in the ratesetter basket. Whilst I consider them to be one of the safest platforms, no platform is unsinkable if unforseen circumstances occur. I'm up to ~18% invested now and will not go higher than 20% - but that's over 16 platforms (albeit waiting to exit some), of which only one has (temporarily) more than 15% of my p2p pot
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Post by westonkevRS on Jan 1, 2016 19:13:15 GMT
IN MY PERSONAL OPINION:
I have 5% (5 platforms), but the wife is on nearer 20% (1 platform, no mugs for guessing which one) which is probably unwise. Especially as I work in the industry.
My personal view is that 5% with a single platform is about right (a bit like with a single equity in a share portfolio), maybe at a stretch 10% with one of the big three is acceptable. But with diversification up to 20% P2P lending is OK, but should limit to 1 or 2% with the small riskier platforms.
Kevin.
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Post by buggerthebanks on Jan 1, 2016 22:28:32 GMT
I currently have 45% of my portfolio in P2P investments, half of which is spread across two major platforms. With the advent of the P2P ISA, I expect this to rise to 70-80%, although I would certainly not recommend other investors to adopt my strategy.
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Post by brokenbiscuits on Jan 2, 2016 13:33:02 GMT
It depends how safe you perceive p2p to be.
On other sites I've seen people include p2p, mostly your zopas and ratesetters, in their cash allocation.
Some people consider 25% cash to be ok.
I think that's overkill.
Ive seen Others compare ratesetter to the way bonds function and those approaching retirement can be happy with 60-80% in bonds- see the very popular vanguard life strategy funds for example. Again for me this is over kill, but then I'm in my 30s.
There is no right answer.
If you would like us to make a suggestion on what we would do in your situation then really we would need to know more about your circumstances?
If you would like to know what we do, its not hugely relevant without knowing our circumstances.
Risk tolerance, age, perception and attitude to risk will all be a factor.
Also p2p is very broad. Some platforms are less likely to incur capital loss than others. You are on the ratesetter board, so are you really asking what percentage would be reasonable in just this platform?
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Post by newlender on Jan 2, 2016 14:02:01 GMT
I have 15% of my portfolio invested in RS (11%) and Zopa (4%). As P2P is a relatively new platform it rarely or never figures in the so-called experts' breakdown of an ideal portfolio - I suspect that they count it as part of the cash tranche. I was simply wondering if anyone here had seen it mentioned as part of a balanced portfolio and what the % was. I fit into the 'golden oldie' category of having no debts, at least 12 months' average spending in cash ISAs and an income mainly from pensions.
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Post by GSV3MIaC on Jan 2, 2016 15:15:43 GMT
Actually I'd be more inclined to lump it with high yield bonds (or bond funds) .. some default risk, and some liquidity risk if you need to get it out in a rush, especially if rates move up (as they must, but who knows how much or when). But yes, even in P2P there is a spectrum (of which you are at the 'safer' end) .. large punts to individual dodgy companies, backed by worthless guarantees, being at the other end. I'd put no more than you can afford to lose in any one place, and being mindful of contagion (i.e if RS or ZOPA went down, the other would be under a lot of pressure, to say the least), and bear in mind that there are still tax advantages to ISAs, SIPPs, EISs, VCTs and various other loopholes if you are threatened by higher rate tax in particular. As someone said on another thread, always be mindful that your return ON capital is handsomely trumped by return OF your capital!!
When you start to worry about it, you are over exposed (unless you are just paranoid, of course).
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Post by brokenbiscuits on Jan 2, 2016 15:48:19 GMT
Actually I'd be more inclined to lump it with high yield bonds (or bond funds) .. some default risk, and some liquidity risk if you need to get it out in a rush, especially if rates move up (as they must, but who knows how much or when). But yes, even in P2P there is a spectrum (of which you are at the 'safer' end) .. large punts to individual dodgy companies, backed by worthless guarantees, being at the other end. I'd put no more than you can afford to lose in any one place, and being mindful of contagion (i.e if RS or ZOPA went down, the other would be under a lot of pressure, to say the least), and bear in mind that there are still tax advantages to ISAs, SIPPs, EISs, VCTs and various other loopholes if you are threatened by higher rate tax in particular. As someone said on another thread, always be mindful that your return ON capital is handsomely trumped by return OF your capital!! When you start to worry about it, you are over exposed (unless you are just paranoid, of course). This is where I sit. The safer p2p investments are more like bonds than cash but possibly less linked to the market than bonds? This year for me p2p has outpormed my ISA funds, however, I wouldn't expect this to be the case in the long term. I'd go Max 20% bonds and p2p with this in mind, for a more stable income growth away from the volatile funds I hold.
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Post by newlender on Jan 2, 2016 16:11:25 GMT
Interesting that you think that P2P won't outperform Cash ISAs long term. I get 1% on my ISAs and 6.1% before tax on one of my 5Yr RS contracts. ISA rates will definitely rise soon but I'll take a chance with that kind of difference. Do you reckon RS will insist on the new ISA being based on new money only? There's going to be a big temptation to switch cash ISA money into it in any event, despite the lack of protection.
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Post by trentenders on Jan 2, 2016 17:27:52 GMT
I'd assume that they are talking about stocks & shares ISA's.
For me, I'm 47% in individual shares (no funds, other than in pensions), 32% P2P (mostly SS & MT) and 21% cash (minimum 3% interest). Using my partner's tax allowance for P2P and a lot of the cash, plus ISA's for the shares. I'd ideally be higher in shares, but I'm looking to upsize my house in a year or so and don't want too much money there until after.
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Post by Financial Thing on Jan 2, 2016 17:41:15 GMT
I think these P2P numbers will change drastically based on how the stock market performs and how interest rates move. If the stock market overall returned to its 10% annual average gains, then I see investos jumping more into stocks and lowering their p2p exposure. If savings accounts started paying 5% again, same.
Many average Joe investors jump from pillar to post chasing returns.
PS. I only invest in the S&P500 as I have little faith in the FTSE's long term performance and growth.
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Post by westonkevRS on Jan 2, 2016 17:56:23 GMT
Interesting that you think that P2P won't outperform Cash ISAs long term. I get 1% on my ISAs and 6.1% before tax on one of my 5Yr RS contracts. ISA rates will definitely rise soon but I'll take a chance with that kind of difference. Do you reckon RS will insist on the new ISA being based on new money only? There's going to be a big temptation to switch cash ISA money into it in any event, despite the lack of protection. It isn't going to be what RateSetter insist, it'll be driven by the regulation. Imagine if "old" money could be included, i.e. historic cash ISAs, it would be tremendous for RateSetter. That oft quoted "wall of money" could actually become true. If you mean old RateSetter money already allocated to loans, I think this will be problematic due to the contract nature of that money already assigned. It'll be difficult from a legal and regulatory perspective to reclassify. Even equity has to be bed and breakfasted (i.e. sold and re-bought in the new structure). I don't think we could do this with money already loaned and on a long term contract. Monthly money could be different.... perhaps that's a better place to park the money for now! Kevin.
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alender
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Post by alender on Jan 2, 2016 17:57:45 GMT
Does anyone know if there is a % of a portfolio that is generally recommended for P2P investment by those in the know? This really depends on your risk appetite, how much you can afford to lose or perhaps get tied up for a lot longer period than you thought you agreed to when committing funds and the risk/rewards.
The problem is P2P has only been around for a few years so the risks are difficult/impossible to access, when we have the next finical crises we will then be able to see how good the credit checks and disaster planning of the P2P platforms are. The best we can effectively do is assessing the risk/rewards of the various platforms against each other and/or the loan rating within the platform. For me RS is one of the safest but I will use other platforms to get a spread of the risk.
IMHO in the long term main factor in how much to commit (if anything) is risk against return; I will not commit funds when interest rates are low, if you look at RS today, one and three years below 4%, one month at 2.5%, for me far below acceptable risk/returns at these levels. I feel a good equity portfolio would give a better risk/return or perhaps even PIBs but this may well change within the month as rates move about.
One other thing to consider is how much time you have available to achieve a decent risk/reward given the volatile nature of RS rates and no interest while you funds are on the market it takes some effort to achieve what I consider an acceptable return. I find it worthwhile but it depends on how much free time you have and the size of your funds.
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Post by brokenbiscuits on Jan 3, 2016 11:57:10 GMT
Interesting that you think that P2P won't outperform Cash ISAs long term. I get 1% on my ISAs... It's the stocks and shares part of my portfolio (in an isa) that I think will outperform p2p over time. 2015 was a bad year for trackers and the very popular vanguard life strategy funds. Yet I think p2p will provide a steady income flow that will balance out growth and returns when stocks and shares could be more volatile... That's why there is room for it in my plans even when I don't think it will be the overall winner. Eggs in baskets and all that. The cash I hold is in current accounts with no tax benefits, but still earning more than it would untaxed in the best rate cash isa. I'm surprised no "expert" has devised their suggestion on a allocation percentage strategy as yet that includes p2p. If nothing else it would get them as a personality some media attention.
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